Back in the black for Bonlac

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Tough cost-cutting and higher world dairy prices have
rejuvenated troubled dairy group Bonlac Foods, which has rebounded
into the black.

Bonlac yesterday reported $12.7 million profit for the six
months to December 31, a turnaround of almost $41 million on the
same period the year before.

General manager Bruce Donnison said the profit reflected
improved returns and cost reductions resulting from a restructure
that shareholders backed in September 2003.

A special shareholders' meeting then voted effectively to give
control of the co-operative to New Zealand dairy giant Fonterra.
Bonlac, which is now only a milk collector and processor, had been
losing millions of dollars from debt and currency losses.

Mr Donnison said cost savings, Bonlac's growing ability to take
advantage of strong international demand and prices, and an
improved product mix, were key factors in the improved result.

"There is confidence in the direction the company is now
moving," he said.

"The turnaround . . . indicates that the company is strongly
positioned this year to deliver the $35-$38 million in annualised
savings outlined in the original restructuring proposal."

First-half revenue was $328 million, down slightly from $344
million for the same period last year.

Mr Donnison said this was because of a rise in foreign exchange
rates and the impact of lower milk production during the
drought.

"These factors were largely offset by higher international
commodity prices and our access to Fonterra's global strength in
the ingredients markets," he said.

Before the restructure, Bonlac had been losing milk suppliers.
Mr Donnison would not say how many suppliers Bonlac now has, but
said there had been rationalisation at the farm gate.